Christmas Shopping Strength: Luxury Purveyors vs. Discounters

Early data from the Christmas shopping season suggests that the consumer is more willing to spend than most pundits had anticipated.

In the deluge of December data to come, there will be answers to questions about how much consumers are spending, where they are buying, how important discounts are to their buying decisions, how much credit they are using, etc.

From a stock picking perspective, however, I am most interested in how upscale the purchases will be. Is this going to be a Tiffany’s (TIF) and Nordstrom (JWN) Christmas or will it be Zales (ZFC) and K-Mart (SHLD) under the tree? There are a number of ways to look at the high end vs. discounter equation, but I am going to offer up one that may simplify things a little.

Four months ago Claymore Advisors launched the Claymore/Robb Report Global Luxury Index ETF (ROB), with a list of holdings appropriate for those who own property on at least three continents. For the normal consumer, the S&P Retail Index has a much broader list of holdings that is more representative of where middle America shops. Combine the two and get one of those StockCharts.com ratio charts like the one below, which shows that for the past three months at least, luxury goods have held up nicely while the stocks of mainstream retailers have struggled in comparison. For the next three weeks in particular, this chart (or the free version) can serve as be a handy guide to determining which tier of retailer – and consumer – is suffering the most.